AI innovations expected to transform DeFi security

Decentralised finance (DeFi) advocates believe artificial intelligence (AI) could be a game-changer in combating cybercrime and enhancing platform security.

According to Peckshield’s Annual Crypto Security Report, digital asset theft totaled $3.01 billion in 2024, split nearly evenly between centralised finance (CeFi) and DeFi.

This marks a significant improvement for DeFi, which accounted for 80% of losses in 2022 and 70% in 2023, suggesting progress in addressing security vulnerabilities.

Large CeFi heists, like the $305 million DMM Crypto hack, contributed to the increase in CeFi-related losses, while critics argue DeFi still faces considerable cybercrime threats.

Proponents of AI tools believe they could help DeFi gain an edge by proactively identifying and addressing vulnerabilities before they are exploited.

Lingling Jiang, partner at DWF Labs, predicts the rise of AI-powered DeFi, or "DEFAI," in 2025.

She highlights AI’s ability to detect suspicious activity in smart contracts and integrate security into every transaction.

"AI and machine learning are becoming game-changers for identifying threats. Imagine having smart systems that can spot suspicious activity in smart contracts before anything goes wrong," Jiang said.

Luke Xie, co-founder and CEO of Satlayer, adds that AI could provide early warnings of attacks, helping users avoid common scams like honeypots and rug pulls.

While these solutions may not eliminate all threats, Xie believes they will give users tools to detect and sidestep the most obvious risks.

Experts suggest that ongoing reports of major DeFi losses could push regulators toward greater global collaboration.

Gianluca Sacco, COO of VALR, foresees a regulatory shift that balances privacy with enhanced oversight.

However, Sacco notes that the decentralised nature of DeFi may challenge the implementation of Know Your Customer (KYC) measures, as developers often remain anonymous.

Sacco also predicts intensified scrutiny of stablecoins, raising questions about their backing and transparency.

Hong Yea, co-founder and CEO of GRVT, expects regulators like Abu Dhabi Global Market (ADGM), Virtual Assets Regulatory Authority (VARA), and Bermuda Monetary Authority to lead cross-border collaboration efforts.

Yea anticipates greater cooperation between traditional finance (TradFi) and DeFi, stressing the potential for AI and regulatory collaboration to reshape the industry.

While challenges persist, the integration of AI-powered tools and increased regulatory coordination could enhance DeFi security and credibility, paving the way for broader adoption and trust in decentralised finance.